The following Property practice note provides comprehensive and up to date legal information covering:
Tenants frequently carry out fit-out works at (or often prior to) the start of a lease and may also carry out refurbishment or further fit-out works during the term. Fit-out works are likely to be internal and non-structural works, whereas refurbishment works may be more substantial. Occasionally, tenants may even want to carry out very significant structural works (eg amalgamating units by demolishing internal walls, installing roof canopies, building extensions, etc).
Regardless of the type of tenant’s works, it is vital that both the landlord and the tenant consider the insurance consequences.
Ordinarily, the landlord’s policy will only cover the works once they are complete, and even then often only if they are an addition to the premises (eg structural works) rather than internal fittings. So the landlord should ensure the tenant is obliged to insure the works during the construction phase. This provision should go in the licence for alterations together with obligations to apply insurance moneys in restoring the works, settling claims and indemnifying the landlord, with the tenant making up any shortfall from its own monies.
The landlord will also be concerned that carrying out of the works might invalidate its buildings insurance—the licence for alterations should also provide for the tenant to notify the landlord’s insurers before commencing the works and to obtain consent.
See our precedent: Licence for alterations.
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